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Saudi Arabia, Turkey watch Iran-Iraq oil rapprochement warily

The oil swap deal between Iran and Iraq represents an opportunity to counterbalance Saudi-Iraq ties.
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In December 2017, Iran and Iraq signed an oil swap deal, and on Jan. 14, Iraqi Oil Minister Jabbar al-Luaibi announced that Iraq will start exporting oil from the northern Kirkuk fields to Iran before the end of January. This new level of Iran-Iraq cooperation, which brings back memories of the so-called Friendship Pipeline between Iran, Iraq and Syria, is liable to disturb leaders in both Saudi Arabia and Turkey, especially as controversy flares over Turkey’s surreptitious oil trade with the Kurdistan Regional Government (KRG) and Saudi Arabia realizes that 2017 oil export increases from Iraq and Iran may have consequences on the kingdom’s export monopolies and power within OPEC.

Iraq's plan to start exporting crude oil from the northern Kirkuk fields to Iran before the end of January depends on logistics, Iraqi Oil Ministry spokesman Assem Jihad told Argus Media in November 2017. As Reuters reported last December, “The agreement signed … by the two OPEC countries provides for Iran to deliver to Iraq’s southern ports, on the Gulf, [refined] oil of the same characteristics and in the same quantities as those it would receive from Kirkuk.” Tanker trucks from Kirkuk will deliver crude oil to the Kermanshah border area where Iran has a refinery.

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